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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB/4
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
ADVANCED BIOTHERAPY CONCEPTS, INC.
(Exact name of registrant as specific in its charter)
Nevada 95-4066865
(State of Incorporation) (I.R.S. Employer
Identification No.)
6355 Topanga Canyon Boulevard
Suite 510
Woodland Hills, California 91367
(Address of executive offices, including zip code)
Registrant's telephone number: (818) 883-3956
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS.
General
Advanced Biotherapy Concepts, Inc. (the "Company") is a
biotechnology venture whose research efforts are directed at the
development of treatments of diseases related to immune system
deficiencies.
The Company is currently researching and developing a family of
treatments collectively referred to as AGT-1. The Company believes
that AGT-1 will remove, inhibit or neutralize certain interferons
(IFN'S) and cytokines, tumor necrosis factor, HLA class II antigens,
IgE, and other pathological factors and/or their receptors, as well as
neutralizing, removing or inhibiting autoantibodies, including
antibodies to target cells, CD4 and DNA. Interferons and cytokines are
soluble components of the immune system that are largely responsible
for regulating the immune response. When overproduced, as in certain
autoimmune diseases, interferons and cytokines can lead to immune
system disturbance and inflammation.
Prior to marketing AGT-1, the Company must obtain regulatory
approval from the United States Food and Drug Administration ("FDA")
and Environmental Protection Agency ("EPA"). The Company is not
sufficiently funded to allow it to complete the product development
process, obtain FDA approval, and marketing AGT-1. However, the
Company will seek additional financing through the private sale of
restricted securities to investors, enter into joint ventures or
licensing or similar arrangements with large pharmaceutical companies
to provide the funding necessary for additional activities. There can
be no assurance that the Company will enter into any such arrangements,
obtain the appropriate regulatory approvals, or develop, manufacture,
market, or distribute commercially viable products.
To date, the Company's activities have consisted primarily of
research, development and testing. Such activities have resulted in
accumulated losses at December 31, 1998. The Company anticipates that
it will incur substantial losses in the foreseeable future as a result
of its continued research. There are no assurances that the Company
will be successful in completing its research and development, receive
FDA approval, implement manufacturing operations and commercially
market AGT-1.
Business Objective
The specific goal of the Company's business is to successfully
develop, test and obtain FDA approval of its products for AGT-1.
GLOSSARY OF TERMS
Antigen A substance or entity, usually a protein,
that induces the production of antibodies.
The antigenicity of a compound depends on its
structure and molecular weight.
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Auto-immune disease A disease in which auto-immunity is one of
the contributory factors. Such disease
includes Addison's disease and rheumatoid
arthritis.
Cutaneous lesions Skin lesions.
Ig (immunoglobulin) A protein of globulin type (usually
gamma-globulin) that possesses antibody
activity.
Immune response The events that occur in humans and other
vertebrate animals when the body is invaded
by foreign protein. It is characterized by
the production of antibodies and may be
stimulated by an infectious organism or
parasite (bacteria, yeast, fungi, protozoa,
etc.), transplanted material, vaccine, sperm
or even the host's own tissue.
Immunegenecity The study of genetic aspects of the type and
formation of immunoglobulins (antibodies).
Interferon-gamma Glycoprotein induced in different cell sites
and appropriate stimulus.
Lymphocyte A white cell arising from tissue of the
lymphoid systems. There are two types of
lymphocytes: B cells and T cells. These
cells are capable of being stimulated by an
antigen to produce a specific antibody to
that antigen and to proliferate to produce a
population of such antibody-producing cells.
Lymphokine Any of a number of soluble physiologically
active factors produced by T lymphocytes in
response to specific antigens. Important in
cell mediated immunity, lymphokins include
interferon, macrophage arming factor,
lymphocyte inhibition factor, macrophage
inhibition factor, chemotactic factor and
various cytotoxic factors.
Macrophage A motile white cell type found in vertebrate
tissue, including connective tissue, the
spleen, lymph nodes, liver, adrenal glands
and pituitary, as well as, in the endothelial
lining of blood vessels and the sinusoids of
bone marrow, and in the monocytes. They
display phagocytic activity and process
antigens for presentation to lymphocytes,
which then prepare antigen-specific
antibodies.
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Pathogenic Descriptive of a substance or organism that
produces a disease.
Placebo An indifferent substance in the form of a
medicine given for the suggestive effect.
Polyclonal antibody An antibody produced in the normal immune
response to an antigen consisting of a number
of closely related, but not identical,
proteins. The variation in Polyclonal
antibodies reflects the facts that they are
formed by a number of different lymphocytes,
in contrast to monoclonal antibodies which
are formed by a clone of identical cells.
Compare monoclonal antibody.
T-Cell A type of lymphocyte that matures in the
thymus gland. These cells are responsible
for the cellular immunity processes, such as
direct cell binding to an antigen, thus
destroying it. T lymphocytes also act as
regulators of the immune response as helper T
cells, or suppressor T cells.
TECHNICAL BACKGROUND
The following is a summary of certain theories related to the
Company's product development activities which are recognized in the
scientific community.
Scientific Rationale and Proposed Product Development.
The Company's main technology platform involves the use of
antibodies. An antibody is a protein that is secreted by cells in the
blood and is part of the body's natural defense system against foreign
invaders such as viruses or bacteria. Antibodies seek out and
selectively bind to their targets, triggering such effects as
neutralizing toxins and marshaling the immune system against infectious
microorganisms and cancer cells. The Company's antibody treatment,
AGT-l, removes or neutralizes certain interferons and cytokines alpha
interferon, gamma interferon and tumor necrosis factor. These are
soluble components of the immune system that are largely responsible
for regulating the immune response and inflammation. During certain
autoimmune diseases(AD's), such as rheumatoid arthritis, these
cytokines are overproduced by the human body, disturbing the immune
system and leading to disease.
In particular, IFN-a or IFN-y is known to trigger or exacerbate
AD's in animals prone to AD, and in patients who have had underlying
autoimmune conditions or a predisposition to them. In animal models of
a number of human AD's, the administration of antibodies to IFN-a or
IFN-y halted or delayed these diseases. This includes antibodies to
IFN-y given to:
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1. Zealand Black and White mice known to develop a severe AD
similar to SLE in humans.
2. Lewis rats afflicted with actively induced experimental AD
of the peripheral nervous system.
3. NOD mice, an animal model of human type I diabetes.
4. BB/Wor rats, a diabetes-prone strain, and CBA/J mice, a
strain susceptible to experimental autoimmune thyroiditis
(EAT) In all cases, the anti-IFN-y antibodies suppressed or
reduced the disease.
The Company also pursuing a collaborative relationship with the
biotechnology companies for the development of fully human antibodies.
The importance of this development is that it will allow the Company to
repeatedly treat patients over a longer period of time, the objective
of which is to commercialize its treatmentization. Until now, clinical
trials have been conducted with polyclonal antibodies which are derived
from animal protein. These can be given to patients for only a few days
in succession.
The Company's goal is to produce a series of humanized antibodies,
a commercializable product. Fully humanized antibodies are produced by
genetic engineering and will result in a product which can be
administered to patients on a much longer term basis. The Company has
identified several biotechnology companies that may manufacture such
antibodies for the Company. The availability of this technology makes
it possible to produce safer and more standardized antibodies for large
scale production. It will take up to one year to produce each
antibody. The antibodies, however, can be produced simultaneously. The
shelf life for the products developed by the Company is approximately
one year.
Human Immunodeficiency
The immune system has two principal responses in the fight against
infectious attacks. The first is the production of antibodies, protein
molecules which latch onto and neutralize foreign invaders such as
bacteria and viruses. Antibodies are believed to coat microbes in a
way that make them palatable to macrophage, scavenger cells which
destroy the invading cells. Each type of antibody acts on only a very
specific target molecule, known as an antigen. Thus, antibodies
designed to attack one type of infection are often ineffective against
others.
While antibodies are effective tools in the immunological system,
they cannot provide full protection against infectious attack. Some
diseases, such as tuberculosis, enter host cells before the antibodies
have an opportunity to attack. The Company has theorized that in order
to combat these invasions, the body also produces lymphocytes that
originate in the thymus, known as the T-cells. The Company has further
hypothesized that T cells recognize protein fragments on the surface of
infected cells, including viruses and mutated molecules in cancer
cells. The T-cells are believed to attack the infected cells and
inhibit the spread of the foreign invader. T-cells also appear to act
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in concert with antibodies to lead the immunologic assault against
infection and disease by stimulating antibodies into an active state
and secreting lymphokines, molecules that promote antibody formation.
The Company has accepted the foregoing hypothesis in developing its
products, however, the foregoing has not been established by any
scientific evidence and there is no assurance that the same will be
established in the future.
T-cells themselves are comprised of many populations two of which
are: CD4 (or helper) T-cells and CD8 (or killer) T-cells. Activated
CD4 T-cells produce large amounts of lymphokines to accelerate the
division of other T-cells and to promote inflammation. Activated CD8
T-cells develop the capacity to punch holes in target cells and secrete
chemicals that kill infected cells.
Research
Research efforts will continue on the Complex Carbohydrate and
Micro-organism Substances to establish efficacy, and identify the
processes involved in carbohydrate based cellular interactions and
immune system modulation and stimulation. The Company intends to
conduct research at its leased facility in Columbia, Maryland.
Additional research needs include experiments to complete the
structural identification of the Company's products. This research is
important for intellectual property protection, required for FDA
approval and to gain a better understanding of the responses triggered
by the substances.
The Company is presently conducting research in Russia.
The Company intends to continue research in select areas. In
doing so, it will be able to consult with experts in particular fields
who have state of the art facilities and trained personnel. All such
research will be conducted under strict confidentiality agreements
which prohibit use and disclosure of the Company's products and
prohibit publication of findings without the consent of the Company.
The amount spent on research and development for the fiscal year
ending December 31, 1997 was $174,245 and for the fiscal year ending
December 31, 1998 was $137,071.
Manufacturing
The Company intends to retain exclusive responsibility for product
manufacturing in order to protect the integrity of AGT-1 and to
generate additional revenue. The Company has identified several
contract manufacturers as having suitable facilities for manufacturing
large quantities of AGT-1.
The raw materials are used as base components in a number of drug
products and are commercially available nationally and internationally.
Further, the raw materials used to manufacture AGT-1 are inexpensive
and commercially available in abundant supply, both nationally and
internationally.
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The Company has not entered into any manufacturing agreement for
AGT-1 and there is no assurance that any agreements will be entered
into in the future. The contract manufacturers schedule time in their
plant upon notice from the Company of needed production.
Government Regulation
The Company's activities are subject to extensive federal, state,
county and local laws and regulations controlling the development,
testing, manufacture and distribution of medical treatments. Most of
the Company's products will be subject to regulation as therapeutics by
the United States Food and Drug Administration ("FDA"), as well as
varying degrees of regulation by a number of foreign governmental
agencies. To comply with the FDA regulations regarding the manufacture
and marketing of the Company's products, the Company may incur
substantial costs relating to laboratory and clinical testing of new
products and for the preparation and filing of documents in the formats
required by the FDA. There are no assurances that the Company will
receive FDA approval necessary to commercially market its products and
that if the Company is successful it will encounter delays in bringing
its new products to market as a result of being required by the FDA to
conduct and document additional investigations of product safety and
effectiveness.
Federal Drug Administration Regulation
The FDA approved process consists of four steps that all new
drugs, antibiotics and biologicals must follow, they are:
1. investigational new drug application (IND)
2. clinical trials
3. new drug application (review and approval)
4. post-marketing surveys
On January 11, 1993, the FDA approved new procedures to accelerate
the approval of certain new drugs and biological products directed at
serious or life-threatening illnesses. These new procedures will
expedite the approvals for patients suffering from terminal illness
when the drugs provide a therapeutic advantage over existing treatment.
The Company believes that its products will fall under the FDA
guidelines for accelerated approval for drugs and biological products
directed at serious and life threatening disease because the Company's
products are targeted as potential treatments for rheumatism and are
non-toxic.
The Company believes that the first step in the approval process,
IND approval, will take approximately 48 months. The Company will
provide the FDA with the results of laboratory and animal research and
a comprehensive clinical trial program for AGT-1. The Company
anticipates filing its IND for all of its products within the next 24
months.
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Upon successful completion of the IND phase, the Company will be
permitted to commence large scale clinical trials with its substances.
Clinical trials are conducted in three phases, normally involving
progressively larger numbers of patients. The Company, in conjunction
with its FDA consultant, will select key physicians and hospitals to
actively conduct these studies. Phase I clinical trials will be
concerned primarily with learning more about the safety of the drug,
though they may also provide some information about the safety of the
drug, though they may also provide some information about
effectiveness. Phase I testing is normally performed on healthy
volunteers although for drugs directed at HIV/AIDS and cancer, testing
on infected people is permitted. The test subjects are paid to submit
to a variety of tests to learn what happens to a drug in the human
body; how it is absorbed, metabolized and excreted, what effect it has
on various organs and tissues; and what side effects occur as the
dosages are increased. The principal objective is to determine the
drugs' toxicity. Phase I trials generally involve 20-40 people at an
estimated cost of $10,000 per patient, taking six months to one year to
complete. The Company has initiated its Phase I clinical trials.
Assuming the results of Phase I testing present no toxic or
unacceptable safety problems, Phase II trials may begin. In many cases
Phase II trials may commence before all the Phase I trials are
completely evaluated if the disease is life threatening and preliminary
toxicity data in Phase I shows no toxic side effects. In life
threatening disease, Phase I and Phase II trials are sometimes combined
to show initial toxicity and efficacy in a shorter period of time. The
primary objective of this stage of clinical testing is designed to show
whether the drug is effective in treating the disease or condition for
which it is intended. Phase II studies may take several months or
longer and involve a few hundred patients in randomized controlled
trials that also attempt to disclose short-term side effects and risks
in people whose health is impaired. A number of patients with the
disease or illness will receive the treatment while a control group
will receive a placebo. The cost per patient is estimated at $10,000.
At the conclusion of Phase II trials, the FDA and the Company will
have a clear understanding of the short-term safety and effectiveness
of the drugs and their optimal dosage levels. Phase III clinical
trials will generally begin after the results of Phase II are
evaluated. The objective of Phase III is to develop information that
will allow the drug to be marketed and used safely. Phase III trials
will involve hundreds, and sometimes thousands, of people with the
objective of expanding on the research.
Phase II. An objective would be to discover optimum dose rates
and schedules, less common or even rare side effects, adverse
reactions, and generate information that will be incorporated into the
drugs' professional labeling, as well as, the FDA-approved guidelines
to physicians and others about how to properly use the drug.
Patient estimates for each phase of the clinical trial process are
as follows:
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Application Phase I Phase II Phase III
AGT-1 20 200 1,000
The third step that is necessary prior to marketing a new drug is
the New Drug Application (NDA) submission and approval. In this step,
all the information generated by the clinical trials will be received
and if successful, the drug will be approved for marketing.
The final step is the random surveillance or surveys of patients
being treated with the drug to determine its long-term effects. This
has no effect on the marketing of the drug unless highly toxic
conditions arise. The time required to complete the above procedures
averages seven years, however, there is no assurance that the Company
will ever receive FDA approval of any of its products.
The Company conducted its first Phase I FDA approved clinical
trial on AIDS patients at Georgetown University between 1986 and 1987.
Subsequent Phase I FDA approved trials were conducted on AIDS patients
at the University of Nebraska during 1993. Since that time, the Company
redirected its research and development strategy and took advantage of
its scientific relationships in Russia for the conduct of clinical
trials on patients who suffer from severe rheumatoid arthritis,
multiple sclerosis and systemic lupus erythematosus.
The Company's clinical trials are at a relatively early stage and
the Company has not received approval from the FDA or any other
governmental agency for the manufacturing or marketing of any products
under development. Consequently, the commencement of manufacturing and
marketing of any products in the United states is, in all likelihood,
a number of years away. The FDA may also require post-marketing testing
and surveillance to monitor the effects of approved products or place
conditions on any approvals that could restrict the commercial
applications of such products. Product approvals may be withdrawn if
compliance with regulatory standards is not maintained or if problems
occur following initial marketing. With respect to patented products or
technologies, delays imposed by the governmental approval process may
materially reduce the period during which the Company will have the
exclusive right to exploit them.
The Company anticipates that it will take up to 48 months before
a product will be available for FDA investigation and approval.
Russian Studies
In collaboration with the Institute of Rheumatology of the Academy
of Medical Sciences of the Russian Federation in Moscow under a joint
clinical agreement dated July 1995, the Company completed clinical
trials on 25 adult patients suffering from rheumatoid arthritis and
several patients with other autoimmune diseases, including systemic
lupus erythematosus. The results demonstrated a striking improvement in
patients receiving this therapy. The patients were selected from among
those with the most severe symptoms of active rheumatoid arthritis who
had not responded to conventional therapy. They were randomized into
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four study groups, three receiving individual or combined antibody
preparations, and the fourth, a combination of all three antibodies.
Each patient received daily injections of AGT-1 for five consecutive
days. A decrease in joint pain and swelling was observed in some
patients as early as the first day of treatment. By the end of the
first week, all groups not only demonstrated significant improvement in
clinical symptoms, including decrease in joint pain, swelling and
stiffness, but also showed reduction of disease severity based on
certain laboratory measures.
In addition to these studies, the Company provided its therapy
AGT-1 to the Research Institute for Pediatric Hematology, Ministry of
Health, Moscow, on a "compassionate needs" basis to treat several
children suffering from severe juvenile rheumatoid arthritis. As an
example, one female child suffered from fever, severe pain in her
wrists and knees, and disabling restriction of her hip joint, despite
the use of traditional drugs and increased use of non-steroidals.
Laboratory and x-ray data indicated evidence of inflammation in the
affected joints. All previous therapy had been ineffective. Following
five days of treatment with AGT-1, significant clinical improvement
occurred with normalization of temperature, decrease of morning
stiffness, reduction of hip pain, significant increase in the range of
motion in the affected joints, improvement in grip strength, and an
overall increase in physical activity and quality of life. More
significantly, x-rays clearly showed improvement of the affected
joints. Other indices also normalized in subsequent tests. For a period
of six months following initial treatment, the patient continued to
show a lack of disease activity and has regained full mobility.
During 1997, clinical trials were also completed on 22 patients
suffering from multiple sclerosis, in collaboration with the Department
of Neurosurgery, Russian State Medical University Hospital, Academy of
Medical Sciences in Moscow. The Company's therapy was administered for
five days with a three month follow-up, a period during which
exacerbation or recurrence of the disease is normal. Antibodies to two
cytokines brought about stabilization of the condition, and in several
cases an improvement in neurological deficiencies. These results
confirm our general approach to the treatment of autoimmune diseases.
During 1997, clinical trials were also completed on 22 patients
suffering from multiple sclerosis, in collaboration with the Department
of Neurosurgery, Russian State Medical University Hospital, Academy of
Medical Sciences in Moscow. The Company's therapy was administered for
five days with a three month follow-up, a period during which
exacerbation or recurrence of the disease is normal. Antibodies to two
cytokines brought about stabilization of the condition, and in several
cases an improvement in neurological deficiencies.
The examples given regarding the animal studies (examples 1-4) are
provided only as examples of possible accomplishments of IFN-a and
IFN-g. The dates of the foregoing animal studies are as follows:
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1. Zealand Black and White Mice-Date of publication of
experiment-1981
2. Lewis Rats-Date of publication of experiment-1989
3. NOD Mice-Date of publication of experiment-1990
4. BB/Wor Rats-Date of publication of experiment-1993
Future Human Testing in Russia
The Company has contracted with the Russian State Medical
University Hospital, Academy of Medical Sciences in Moscow, to conduct
expanded double-blind trials on 65 patients with progressive multiple
sclerosis, based on the clinical data from the initial studies, which
indicated safety and efficacy. These studies will be conducted under
the direction of Professor Eugene Gusev, M.D., Head of Neurology,
Department of Neurosurgery, and President of the All-Russian Society of
Neurologists. The Company is also negotiating for the commencement of
double-blind studies with the Rheumatology Clinic of the Institute of
Rheumatology of the Academy of Medical Sciences of the Russian
Federation in Moscow. These studies will be conducted under the
direction of Professor Jakov Sigidin, M.D. Studies will be conducted on
patients with rheumatoid arthritis and systemic lupus erythematosus,
again based on the previous studies which indicated safety and
efficacy.
These future studies will provide further validation and evidence
regarding the Company's scientific approach to the treatment of
autoimmune diseases.
In addition, the Company has signed an agreement with the Serbsky
National Research Center for General & Forensic Psychiatry for the
conduct of clinical trials in the treatment of certain autoimmune
psychiatric diseases. These trials will be conducted under the
direction of Yuri A. Alexadrovsky, M.D., Professor of Psychiatry. The
trials, using AGT-1, have been approved by the Ministry of Health of
the Russian Federation.
Competition
The Company will encounter significant competition from firms
currently engaged in the biotechnology industries. The majority of
these companies will be substantially larger than the Company, and have
substantially greater resources and operating histories. The Company
is aware of other competitors seeking cures for autoimmune diseases
such as HIV, however, the Company is not aware of any competitors
seeking to produce the same products as the Company.
Product Liability Exposure
The Company does not maintain any liability insurance. Even if
the Company obtains product liability insurance, there is no assurance
that available amounts of coverage will be sufficient to adequately
protect the Company in the event of a successful product liability
claim. According, if litigation is initiated against the Company, the
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Company will have to pay all costs associated with the litigation as
well as any judgment rendered against the Company. In the event a
large judgment is entered against the Company, the Company may not be
able to pay the same and he Company could be forced to cease
operations. However, the Company believes that it could not be held
liable during trials because it requires each participating patient to
execute a waiver of claims as a result of adverse reaction to the
Company's products.
Because many of the Company's products may be used on human
patients, the Company may be exposed to product liability claims. The
Company does not maintain any liability insurance. Even in the Company
obtains liability insurance there is no assurance that available
amounts of coverage will be sufficient to adequately protect the
Company in the event of a successful product liability claim.
Patent Status and Protection of Proprietary Technology
The Company has been issued patent No.'s 4,824,432, 5,626,843 and
5,888,511. It also has a U.S. patent pending filed on December 23,
1996, application number 08/771,831 and Patent Cooperation Treaty (PCT)
application filed.
The Company's most recent patent gives the company patent
protection for a new anti-cytokine approach to treating different
autoimmune diseases. These include rheumatoid arthritis, multiple
sclerosis, systemic lupus erythematosus and insulin-dependent diabetes.
The patented treatment uses various methods to neutralize or block
specific combinations of cytokines and their receptors. In management's
opinion, the Company's patented approach is broader in scope than
certain other patented treatments.
Dependence Upon Key Personnel
The Company relies greatly in its efforts on the services and
expertise of its officers and directors. The operation and future
success of the Company would be adversely affected in the event that
any of them is incapacitated or the Company otherwise loses his
services.
Uncertainties Associated with Research and Development Activities
The Company intends to continue its research and development
activities on its product and for the purpose of developing proprietary
products. Research and development activities, by their nature,
preclude definitive statements as to the time required and costs
involved in reaching certain objectives. If research and development
requires more funding than anticipated, the Company may have to reduce
product development efforts or seek additional financing. There can be
no assurance that the Company would be able to secure any necessary
additional financing or that such financing would be available on
favorable terms.
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Year 2000 Readiness Disclosure
The Company is currently reviewing its operations to ensure that
they will not be adversely affected by year 2000 software failures,
which can arise in time-sensitive software applications that utilize a
field of two digits to define the applicable year. In such
applications, a date using "00" may be recognized as the year 1900
rather than the year 2000.
The Company's internal systems include both its information
technology ("IT") and non-IT systems. The Company has completed an
assessment of its material internal IT systems and its non-IT systems
including security systems, building equipment and utilities. To the
extent that the Company is not able to test the technology provided by
third-party vendors, the Company has received assurances from such
vendors that their systems are Year 2000 ready. Management currently
believes that all material systems which the Company uses are Year 2000
ready. It should be noted, however, that the Company depends on timely
and uninterrupted interactions with its vendors and its customers,
through the use of banking systems, commercial airline, travel,
telecommunications via long-distance and local service providers, and
local utilities, including for power. To the extent that Year 2000
ready alternatives are not readily available at the time, any
interruption caused by a lack of Year 2000 readiness of the part of
such vendors could have a material adverse effect on the Company's
business, operating results and financial condition.
Despite testing by the Company, the IT and non-IT systems used by
the Company may contain undetected errors or defects associated with
Year 2000 date functions. Known or unknown errors or defects in the
Company's IT systems or non-IT systems could result in delay or loss of
revenue, diversion of resources, damage to the Company's reputation,
and increased service costs, any of which could materially adversely
affect the Company's business, operating results, or financial
condition.
The Company believes that the most likely worst case scenario
related to Year 2000 risks is a material business interruption that
leads to customer dissatisfaction and the termination of a customer
relationship. Such an interruption could occur due to a breakdown in
any number of the Company's IT or non-IT systems, or the systems of
third parties. The Company currently does not have a contingency plan
in the event a particular system or vendor is not Year 2000 ready.
Such a plan will be developed if it becomes clear that the Company is
not going to achieve its scheduled objectives in respect of Year 2000
readiness. There can be no assurance that unexpected Year 2000
readiness problems of the Company or its vendors, customers and service
providers will not materially adversely affect the Company's business,
operating results and financial condition. The foregoing assessment
represents management's best estimates at the present time, which could
change significantly in the future.
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Marketing
Assuming the Company is able to obtain FDA approval of its
products, it intends to market the same through collaborative
relationships with other companies. Joint Venture partners will be
selected on the basis of experience and the degree of financial success
they exhibit in the industry. There are no assurances that the Company
will obtain FDA approval for AGT-1 and there are no assurances that the
Company will be successful in entering into agreements with established
multinational companies.
Company's Office
The Company's administrative offices are located at 6355 Topanga
Canyon Boulevard, Suite 510, Woodland Hills, California 91367 and its
telephone number is (818) 883-3956. The Company leases 500 square feet
of space. The annual base rental is $-0- and the term of the lease is
three years. The Company leases the foregoing office space from
Buccellato & Finkelstein, Inc. The Company also subleases
approximately 3,500 square feet of research and development space at
9110 Red Branch Road, Columbia, Maryland 21045 from New Horizons
Diagnostics Inc. The annual base rental is $-0- and the term of the
lease is three years.
Employees
The Company is a development stage company and currently has three
employees other than its Officers and Directors. See "Management."
Management of the Company expects to hire employees as necessary.
RISK FACTORS
1. Liquidity; Need for Additional Financing. The Company
believes that it does not have the cash it needs for at least the next
twelve months based upon its internally prepared budget. The Company's
cash requirements, however, are not easily predictable and there is a
possibility that its budget estimates will prove to be inaccurate. If
the Company is unable to generate a positive cash flow before its cash
is depleted, it will be required to curtail operations substantially,
seek additional capital. There is no assurance that the Company will
be able to obtain additional capital if required, or if capital is
available, to obtain it on terms favorable to the Company. The Company
may suffer from a lack of liquidity in the future which could impair
its short-term marketing and sales efforts and adversely affect its
results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
2. Lack of Regulatory Clearance/Approval and Limited Clinical
Data. The Company's product has not been cleared for marketing by the
FDA or foreign regulatory authorities and can not be commercially
distributed in the U.S. and some international markets unless and until
such clearance is obtained. Failure to obtain FDA clearance would delay
sales of the AGT--I(TM) product and would materially affect the
financial condition of the Company.
<PAGE> 15
3. Dependence on the Product. The Company expects to derive a
substantial majority of its revenues from AGT-1, product licensing and
royalty fees. The life cycle of the AGT-I(TM) product is difficult to
estimate in terms of current and future technological developments,
competition, and other factors. Failure of the Company to successfully
commercialize the AGT-1, product or to realize significant revenues
from the product would have a material adverse effect on the financial
condition of the Company. As of the date hereof the Company has not
realized any revenues from the sale of AGT-1.
4. Lack of Marketing and Sales Experience. The Company has not
yet sold any products. After the necessary regulatory approvals are
obtained, the Company intends to market and sell the AGT-1, product
through a network of qualified independent distributors, agents, and
key strategic partners, none of which are currently in place. There are
no assurances that the Company can establish the necessary
relationships for marketing and selling the AGT-1, product or that the
network will successfully implement an effective marketing and sales
strategy.
5. Manufacturing. The Company lacks the facilities to
manufacture its product and does not have an adequate supply of product
to begin Phase II clinical studies. If the Company is unable to
contract for manufacturing capabilities on acceptable terms, it would
result in the delay of sales which in turn could materially impair the
Company's competitive position and the possibility of the Company
achieving profitability.
6. Uncertainty Relating to Favorable Third-Party Reimbursement.
In the U.S., success in obtaining favorable third-party payment for a
new product depends greatly on the ability to present data which
demonstrates positive outcomes and reduced utilization of other
products or services as well as cost data which shows that treatment
costs using the new product are equal to or less than what is currently
covered for other products. Failure by the Company to present such
clinical data would adversely affect the Company's ability to obtain
favorable third party reimbursement as well as the commercial success
of the AGT-1 product.
7. Patents and Proprietary Rights. The Company's success and
ability to compete effectively will depend in part on the strength of
its patents and the ability to obtain protection for its products in
foreign markets. No assurance can be given that any patents issued to
the Company will not be challenged, invalidated, or circumvented.
Litigation, which could result in substantial cost to the Company, may
also be necessary to enforce any patents issued to the Company and/or
determine the scope and validity of other's proprietary rights
8. Year 2000. The Company is aware of the issues associated
with the programming code in existing computer systems as the
millennium (year 2000) approaches. The "year 2000" problem is
pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date
<PAGE> 16
sensitive information when the year changes to 2000. Systems that do
not properly recognize such information could generate erroneous data
or cause a system to fail. Since the Company has not acquired
additional hardware or software technology in support of its services
at present, the year 2000 problem is not anticipated to have a
significant impact on the Company's operations. However, it may have
a significant impact on key suppliers and customers with whom the
Company may conduct business in the future.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company has inadequate cash to maintain operations during the
next twelve months. For the twelve month period subsequent to December
31, 1998, the Company anticipates that its minimum cash requirements to
continue as a going concern will be $200,000. In order to meet the
foregoing cash requirements, the Company will have to sell securities
or obtain a loan. There is no assurance, however, that the Company
will be able to sell any securities or obtain a loan. The Company also
intends to establish a collaborative relationship with either a
pharmaceutical or biotechnological company which could result in the
generation of royalty payments to the Company. As of the date hereof,
the Company has not initiated any discussions with or entered into
agreements with any pharmaceutical or biotechnological companies. In
the event that the Company does not raise additional capital from any
of the foregoing sources, it may have to curtail operations.
The Company's research and development goal is to produce a series
of fully human antibodies that are produced by genetic engineering and
will result in a product which can be administered to patients on a
long term basis. The Company has identified several biotechnology
companies that can manufacture such antibodies for the Company. The
availability of this technology will make it possible to produce safer
and more standardized antibodies for commencement of human clinical
trials, under FDA guidelines, in the United States.
The Company has no expected purchases or sales of significant
equipment.
There are no expected significant changes in the number of
employees of the company.
Results of Operations - From Inception through December 31, 1998.
The Company is considered to be in the development stage as
defined in Statement of Financial Accounting Standards No. 7. There
have been no operations since incorporation.
Liquidity and Capital Resources.
As of December 31, 1998, the Company issued 27,141,075 shares of
its Common Stock to officers, directors and others. The Company has no
operating history and no material assets. The Company had $1,182 in
cash as of December 31, 1998. As of September 30, 1999, the Company
had 28,919,075 shares of its Common Stock issued and outstanding to
officers, directors and others. The Company had $1.076 in cash as of
September 30, 1999.
<PAGE> 17
Fiscal 1998 compared to fiscal 1997
For the year ending December 31, 1998, the Company realized a net
loss of $259,912 compared to a net loss of $337,461 for the year ending
December 31, 1997. This reduction in net loss was principally a result
of a reduction in research and development expenses in the amount of
$37,174, a reduction in accrued salaries in the amount of $60,000 and
a reduction in shareholder relation expenses in the amount of
$10,620. Shareholder relation expenses were not in any way
related to the advertising of products for sale but were specifically
related to the expense of preparing and issuing shareholders newletters
and press releases during each of the respective periods. The Company,
did, however, increase expenditures related to legal fees associated
with the filing of certain claims related to its patent applications.
Expenditures were $23,149 in 1998 and $5,900 in 1997. The Company's
financing activities in terms of the issuance of common stock, for
working capital purposes, also declined from $158,800 in 1997 to
$30,500 in 1998. The net effect of the changes resulted in a decrease
of cash between 1997 and 1998 of $68,845. The Company had not realized
operating revenues through December 31, 1998.
Interim Periods Ended September 30, 1999 and 1998.
For the nine months ended September 30, 1999, the Company realized
a net loss of $45,514 compared to a net loss of $68,016 for the nine
months ending September 30, 1998. This reduction of net loss of
$22,502 was principally due to the net effect of the following:
1. Reduction in research and development expenses in the amount of
$18,200.
2. Increase in professional fees of $20,003, principally related to
legal and accounting fees associated with the preparation of the
Company's Form 10-SB with the Securities and Exchange Commission,
and
3. Initial accrued revenues in the amount of $22,000 for the period
ending September 30, 1999. Such revenues were collected in cash
on October 22, 1999 and was specifically related to the sale of
antibody serum. There were no revenues for the nine months ending
September 30, 1998.
ITEM 3. DESCRIPTION OF PROPERTIES.
The Company's administrative offices are located at 6355 Topanga
Canyon Boulevard, Suite 510, Woodland Hills, California 91367 and its
telephone number is (818) 883-3956. The Company leases 500 square feet
of space. The annual base rental is $-0- and the term of the lease is
three years. The Company leases the foregoing office space from
Buccellato & Finkelstein, Inc.
The Company's lease commenced on January 1, 1997 and expires on
December 31, 1999. The Company intends to renew such lease upon
expiration, however, there is no assurance that the lessor will renew
said lease. In the event the lessor will not renew said lease, the
Company will have to move to new facilities. The Company believes that
there is adequate rental space available if the Company has to find a
new location and its operations will not be adversely effected by such
relocation.
<PAGE> 18
The Company also subleases approximately 3,500 square feet of
research and development space at 9110 Red Branch Road, Columbia,
Maryland 21045 from New Horizons Diagnostics, Inc. The annual base
rental is $-0- and the term of the lease is three years.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent
(5%) or more of the Company's Common Stock, each director individually
and all officers and directors of the Company as a group. Each person
has sole voting and investment power with respect to the shares of
Common Stock shown, unless otherwise noted, and all ownership is of
record and beneficial.
Name and Number of Percentage
address of owner Shares Position of Shares
Simon V. Skurkovich 1,193,770[1] Chairman of 4.14%
802 Rollins Avenue the Board of
Rockville, MD 20852 Directors and CEO
Edmond Buccellato 126,000[2] President and 0.44%
6716 Faust Ave. Director
West Hills, CA 91307
Boris V. Skurkovich 575,020[3] Director 1.99%
18 Blaisdell Ave.
Pawtucket, RI 01860
Joseph Bellanti 150,000[4] Director 0.52%
607 Corewood Lane
Bethesda, MD 20816
Larry Loomis 325,000[5] Director 1.13%
9110 Red Branch Rd.
Columbia, MD 21045
Leonard Millstein 465,100[6] Director 1.61%
1677 Calle Alta
La Jolla, CA 92037
Richard Eamer -0- Director 0.00%
2400 Broadway Ave.
Suite 500
Santa Monica, CA 90404
Jeanne Kelly 150,000[7] Secretary/ 0.52%
4515 Willard Ave. Treasurer
Chevy Chase, MD 20815
All officers and 2,984,890 10.35%
directors as a
group (8 persons)
[1] Does not include options to purchase up to 300,000 shares of
common stock at an exercise price of $0.10 per share.
<PAGE> 19
[2] Shares held in the name of the Buccellato Family Trust. Does not
include options to purchase up to 50,000 shares of common stock at
an exercise price of $0.10 per share and options to purchase up to
50,000 shares of common stock at an exercise price of $0.20 per
share.
[3] Does not include options to purchase up to 100,000 shares of
common stock at an exercise price of $0.01 per share; options to
purchase up to 150,000 shares of common stock at an exercise price
of $0.02 per share; and, 50,000 shares of common stock at an
exercise price of $0.10 per share.
[4] Does not include options to purchase up to 100,000 shares of
common stock at an exercise price of $0.20 per share and options
to purchase up to 350,000 shares of common stock at an exercise
price of $0.01 per share. All of the foregoing options have been
assigned to I Care Foundation.
[5] Does not include options to purchase up to 75,000 shares of common
stock at an exercise price of $0.20 per share and options to
purchase up to 10,000 shares of common stock at an exercise price
of $0.10 per share.
[6] Does not include options to purchase up to 125,000 shares of
common stock at an exercise price of $0.20 per share.
[7] Does not include options to purchase up to 150,000 shares of
common stock at an exercise price of $0.01 per share and options
to purchase up to 100,000 shares of common stock at an exercise
price of $0.10 per share and options to purchase up to 50,000
shares of common stock at an exercise price of $0.20 per share.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Simon Skurkovich, M.D. 76 Chairman of the Board of Directors
Edmond Buccellato 54 President and member of the Board
of Directors
Boris Skurkovich, M.D. 44 Vice President and a member of the
Board of Directors
Joseph Bellanti, M.D. 42 Vice President and a member of the
Board of Directors
Lawrence Loomis 51 Member of the Board of Directors
Leonard Millstein 47 Member of the Board of Directors
<PAGE> 20
Richard Eamer 75 Member of the Board of Directors
Jeanne Kelly, Ph.D. 43 Secretary/Treasurer
Each director serves for a term of three years and one-third of
the directors are elected at the annual meeting of shareholders. The
Company's officers are appointed by the Board of Directors and hold
office at the discretion of the Board.
Simon Skurkovich, M.D. - Since 1985, Dr. Skurkovich has served as
Chairman of the Board. He has obtained five patents in Russia, and
eight in the U.S. He is the creator of immune preparations from human
blood against antibiotic resistant bacteria which saved thousands of
lives in the Soviet Union and eastern Europe. In Russia, he was
professor and Chief of the Immunology Laboratory of the Institute of
Hematology and Blood Transfusion and was awarded gold and silver medals
for his scientific discoveries. His laboratory was also awarded the
nation's highest honor, the Lenin Prize, for his patented work. Dr.
Skurkovich received an M.D., Ph.D. and a Doctorate in Medical Sciences
(D.Sc.) from Pirogov State Medical Institute in Moscow. He has written
more than 200 articles for scientific publications.
Edmond Buccellato - Since 1995, Mr. Buccellato has served as
President and a member of the Board of Directors. He was co-founder,
member of the Board of Directors and Vice President of Finance of Phase
Medical, Inc., an infusion therapy company sold to Becton Dickinson in
1994. He was also co-founder, member of the Board of Directors and Vice
President of Finance of Synergistic Systems, Inc., a company which
became the largest medical billing company in the western United
States. He is also co-founder and member of the Board of Directors of
Polymer Safety, LLC, a manufacturer of synthetic medical and industrial
examination gloves. Mr. Buccellato received his undergraduate degree
From California State University at San Diego, and his graduate degree
from the University of Southern California.
Boris Skurkovich, M.D. - Since 1986, Mr. Skukovich has served as
Vice President and member of the Board of Directors. He completed a
clinical and research fellowship at the Maxwell Finland Laboratory for
Infectious Diseases, Boston City Hospital, Boston, Massachusetts and
presently is a professor at Brown University Medical School. He has
collaborated with his father on the development of the Company's
treatments of autoimmune diseases. Dr. Skurkovich received his M.D.
from the Moscow State Medical Institute.
Joseph A. Bellanti, M.D. - Since 1986, Mr. Bellanti has served
as Vice President and member of the Board of Directors. He is Director
of the International Center for Interdisciplinary Studies of Immunology
and a professor of Pediatrics and Microbiology at Georgetown University
Medical School. He has authored or co-authored over 400 scientific
articles and abstracts and 25 books and/or chapters in books in the
fields of immunology and virology. His textbook, "Immunology", now in
its third edition, is used in many medical school classrooms throughout
the country. Dr. Bellanti received his B.S. and M.D. degrees from the
University of Buffalo, Buffalo, New York.
<PAGE> 21
Leonard Millstein - Since 1986, Mr. Millstein has served as a
member of the Board of Directors. Mr. Millstein received his MSCE and
Ph.D. in Civil Engineering from Moscow State Construction University in
1964 and 1974, respectively. After immigrating to the United States in
1978 he held teaching positions at Howard University in Washington D.C.
and Johns Hopkins University in Baltimore, Maryland. He has over 200
publications and is a member of the American Concrete Institute and
American Society of Civil Engineers. From 1981 to the present, he has
been a CEO of Radcon Products, a company involved in manufacturing of
proprietary concrete sealants. From 1990 until the present, he has
been a Chairman of the Board of TTLTIC, a private consulting company.
Richard Eamer - Since 1998, Mr. Eamer has served as a member of
the Board of Directors. Prior to joining the Company, Mr. Eamer was
the founder, Chairman of the Board and Chief Executive Officer of
National Medical Enterprises (NME), a company with over $5 billion in
revenues. MNE was sold to Tenet Healthcare Corporation (NYSE symbol
THC) which presently has a market capitalization of over 11 billion
dollars. He is also the founder to two newly established closely held
companies, one in veterinary care ant the other in industrial otology.
Mr. Eamer is a former Director and Chairman of the Board of Hillhaven
Corporation, the nation's second largest operator or long term care
facilities. He was also a Director of Unocal Corporation and is
currently a Director of Imperial Bank. He is a member of the
Conference Board and as associate at the University of Southern
California, a member of the Board of Trustee of the Hugh O'Brian Youth
Foundation, serves on the Board of Trustees of the UCLA Foundation and
the Hope for Hearing Foundation. Other affiliations include the
Pepperdine University Board of Regents and the Board of the John
Douglas French Alzheimer's Foundation. Mr. Eamer is also the recipient
of the Doheny Eye Institute's "The Doheny Award" for lifetime
achievement and preeminence in his field.
Jeanne Kelly - Since 1986, Ms. Kelly has served as
Secretary/Treasurer of the Company and assistant to Dr. Simon
Skurkovich. She holds a Ph.D. in Social Anthropology from American
University. Since 1986, Ms. Kelly has been employed by Coates &
Jarrett, Inc., a consulting firm located in Washington, D.C. Coates &
Jarrett conducts research on behalf of emerging technology
corporations.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by the
Company since January 1, 1996 through December 31, 1998, for each
officer and director of the Company. This information includes the
dollar value of base salaries, bonus awards and number of stock options
granted, and certain other compensation, if any.
<PAGE> 22
<TABLE>
<CAPTION>
SUMMARY ACCRUED COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Name and Annual Stock Underlying LTIP All
Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Simon 1998 $100,000 0 0 0 0 0 0 0
Skurkovich 1997 $150,000 0 0 0 0 0 0 0
Chairman 1996 $150,000 0 0 0 0 0 0 0
Edmond 1998 $ 50,000 0 0 0 0 0 0 0
Buccellato 1997 $100,000 0 0 0 0 0 0 0
President 1996 $ 50,000 0 0 0 0 0 0 0
Boris 1998 0 0 0 0 0 0 0 0
Skurkovich 1997 $45,000 0 0 0 0 0 0 0
Vice 1996 0 0 0 0 0 0 0 0
President
Joseph 1998 0 0 0 0 0 0 0 0
Bellanti 1997 0 0 0 0 0 0 0 0
Vice 1996 0 0 0 0 0 0 0 0
President
Lawrence 1998 0 0 0 0 0 0 0 0
Loomis 1997 0 0 0 0 0 0 0 0
Director 1996 0 0 0 0 0 0 0 0
Jeanne 1998 0 0 0 0 0 0 0 0
Kelly 1997 $45,000 0 0 0 0 0 0 0
Secretary 1996 $45,000 0 0 0 0 0 0 0
Treasurer
Leonard 1998 0 0 0 0 0 0 0 0
Millstein 1997 0 0 0 0 0 0 0 0
Director 1996 0 0 0 0 0 0 0 0
Richard 1998 0 0 0 0 0 0 0 0
Eamer 1997 0 0 0 0 0 0 0 0
Director 1996 0 0 0 0 0 0 0 0
</TABLE>
The Company anticipates paying the following salaries in 1999,
subject to the Company beginning profitable operations and generating
sufficient revenues to pay the same:
Simon Skurkovich Chairman 1999 $100,000
Edmond Buccellato President 1999 $ 75,000
Boris Skurkovich Vice President 1999 $ -0-
Joseph Bellanti Vice President 1999 $ -0-
Lawrence Loomis Director 1999 $ -0-
Jeanne Kelly Secretary/ 1999 $ 45,000
Treasurer
Leonard Millstein Director 1999 $ -0-
Richard Eamer Director 1999 $ -0-
There are no retirement, pension, or profit sharing plans for the
benefit of the Company's officers and directors. The Company has a
non-qualified stock option plan for the benefit of officers and
directors. The number of shares of common stock under option as of May
31, 1999 were 1,660,000.
<PAGE> 23
Option/SAR Grants.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to officers and/or directors:
<TABLE>
<CAPTION>
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months[1] Price ($/Sh) Exercised Date
<S> <C> <C> <C> <C> <C>
Simon Skurkovich 300,000 0 $0.10 -0- 12/31/05
Edmond Buccellato 50,000 0 $0.10 -0- 12/31/05
50,000 0 $0.20 -0- 12/31/05
Boris Skurkovich 100,000 0 $0.01 -0- 12/31/05
150,000 0 $0.02 -0- 12/31/05
50,000 0 $0.10 -0- 12/31/05
</TABLE>
[1] No options were issued in the past fiscal year.
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance.
Compensation of Directors.
Directors do not receive any compensation for serving as members
of the Board of Directors. The Board has not implemented a plan to
award options to any Directors. There are no contractual arrangements
with any member of the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Simon Skurkovich, the Company's Chairman of the Board of Directors
and a shareholder of the Company advanced funds to pay a significant
portion of the Company's expenses since 1989. The Company owes Mr.
Skurkovich unpaid salaries of $100,000 for 1998 and $150,000 for 1997.
At December 31, 1998 the cumulative amount owed Mr. Skurkovich by the
Company for expenses was $262,776 and for unpaid salaries was
$1,146,000
The Company is currently indebted to Jeanne Kelly, the Company's
Secretary/Treasurer in the amount of $184,000 for unpaid salaries and
$13,381 for expenses advanced by Ms. Kelly. The foregoing debts are
evidence by promissory notes.
The Company is currently indebted to Edmond Buccellato, the
Company's President, in the amount of $200,000 for unpaid salaries.
The Company uses 3,500 square feet of office space on a rent free
basis. The office space is owned by Buccellato and Finkelstein, Inc.
Mr. Buccellato is the President of the Company.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation
and to its knowledge, no action, suit or proceedings has been
threatened against its officers and its directors.
<PAGE> 24
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
Market.
The Company's securities trade on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the "Bulletin
Board") under the symbol ADVB. The table shows the high and low bid of
Company's Common Stock during the fiscal years 1997 and 1998 and the
third quarter, 1999:
QUARTER ENDED BID
1997 High Low
March 31 $0.25 $0.10
June 30 $0.18 $0.13
September 30 $0.20 $0.11
December 31 $0.18 $0.12
1998
March 31 $0.24 $0.12
June 30 $0.20 $0.09
September 30 $0.11 $0.06
December 31 $0.08 $0.04
1999
March 31 $0.20 $0.10
June 30 $0.08 $0.05
September 30 $0.10 $0.01
Holders
As of March 31, 1999, the Company had 1,754 holders of record of
its Common Stock. This number does not include those beneficial owners
whose securities are held in street name. The total number of
stockholders is estimated to be approximately 3,200.
Dividends
The Company has never paid a cash dividend on its Common Stock and
has no present intention to declare or pay cash dividends on the Common
Stock in the foreseeable future. The Company intends to retain any
earnings which it may realize in the foreseeable future to finance its
operations. Future dividends, if any, will depend on earnings,
financing requirements and other factors.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 29,038,265 shares of Common Stock issued and
outstanding as of December 5, 1999. Of the 29,038,265 shares of the
Company's Common Stock outstanding, 13,717,646 shares are freely
tradeable and 15,320,619 shares can only be resold in compliance with
Reg. 144 adopted under the Securities Act of 1933 (the "Act").
In general, under Rule 144 as currently in effect, a person (or
persons whose Shares are aggregated) who has beneficially owned Shares
privately acquired directly or indirectly from the Company or from an
affiliate, for at least one year, or who is an affiliate, is entitled
to sell within any three month period a number of such Shares that does
not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks, immediately
preceding such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person (or persons
whose Shares are aggregated) who is not deemed to have been an
affiliate at any time during the 90 day preceding a sale, and who has
beneficially owned Restricted Shares for at least two years, is
entitled to sell all such Shares under Rule 144 without regard to the
volume limitations, current public information requirements, manner of
sale provisions or notice requirements.
<PAGE> 25
In 1996, the Company issued 520,000 shares of common stock to
individuals in consideration of the sum of $26,000. The foregoing
securities were issued pursuant to Section 4(2) of the Securities Act
of 1933 (the "Act") and are restricted securities as that term is
defined in Rule 144 of the Act.
In 1997, the Company issued 490,000 shares of common stock to
individuals in consideration of the sum of $24,500. The foregoing
securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
In 1997, the Company issued 1,310,500 shares of common stock to
individuals in consideration of the sum of $131,050. The foregoing
securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
In 1997, the Company issued 325,000 shares of common stock to Mr.
Larry, A Member of the Board of Directors, related to the exercise of
stock options in consideration of the sum of $3,250. The foregoing
securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
In 1998, the Company issued 305,000 shares of common stock to
individuals in consideration of the sum of $30,500. The foregoing
securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
In 1996, the Company issued 234,000 shares of common stock to one
individual in consideration of services valued at $7,020. The
foregoing securities were issued pursuant to Section 4(2) of the Act
and are restricted securities as that term is defined in Rule 144 of
the Act.
In 1996, the Company issued 26,000 shares of common stock to one
individual in consideration of services valued at $1,300. The
foregoing securities were issued pursuant to Section 4(2) of the Act
and are restricted securities as that term is defined in Rule 144 of
the Act.
In 1996, the Company issued 48,500 shares of common stock to one
individual in consideration for forgiveness of debt valued at $5,820.
The foregoing securities were issued pursuant to Section 4(2) of the
Act and are restricted securities as that term is defined in Rule 144
of the Act.
In 1996, the Company issued 150,000 shares of common stock to one
individual in consideration of the forgiveness of a debt in the amount
of $7,500. The foregoing securities were issued pursuant to Section
4(2) of the Act and are restricted securities as that term is defined
in Rule 144 of the Act.
In 1997, the Company issued 155,500 shares of common stock to
individuals in consideration of the sum of $7,775. The foregoing
securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
In 1998, the Company issued 305,000 shares of common stock to
individuals in consideration of the sum of $30,500. The foregoing
securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
<PAGE> 26
Between January 1, 1999 and May 31, 1999, the Company issued
1,507,100 shares of common stock to individuals in consideration of the
sum of $82,770. The foregoing securities were issued pursuant to
Section 4(2) of the Act and are restricted securities as that term is
defined in Rule 144 of the Act.
Between January 1, 1999 and May 31, 1999, the Company issued
197,490 shares of common stock individuals in consideration of services
valued at $9,874. The foregoing securities were issued pursuant to
Section 4(2) of the Act and are restricted securities as that term is
defined in Rule 144 of the Act.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of the Company consists of 50,000,000
shares, $0.001 par value per share. All shares have equal voting
rights and are not assessable. Voting rights are not cumulative and,
therefore, the holders of more than 50% of the Common Stock could, if
they chose to do so, elect all of the directors of the Company.
Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders
of the Common Stock do not have preemptive rights to subscribe for any
securities of the Company and have no right to require the Company to
redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and non-assessable.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has
been paid on the Common Stock since inception, and none is contemplated
in the foreseeable future.
Transfer Agent
The Company's transfer agent is American Transfer & Trust, 40 Wall
Street, New York, NY 10005 and its telephone number is (718) 921-8202.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Nevada and certain provisions of the
Company's Articles of Incorporation under certain circumstances provide
for indemnification of the Company's Officers, Directors and
controlling persons against liabilities which they may incur in such
capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this
description is qualified in its entirety by reference to the Company's
Articles of Incorporation and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
<PAGE> 27
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
ITEM 13. FINANCIAL STATEMENTS.
CONTENTS
December 31, 1998 - Audited Statements
Independent Auditor's Report F-1
Financial Statements:
Balance Sheets F-2
Statement of Operations F-3
Statement of Stockholders' Equity (Deficit) F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6 - F-12
September 30, 1999 - Unaudited Statements
Statement of Management 1
Financial Statements:
Balance Sheets 2
Statement of Operations 3
Statement of Stockholders' Equity (Deficit) 4
Statement of Cash Flows 5
Notes to Financial Statements 6
<PAGE> 28
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants & Business Consultants
601 West Riverside, Suite 1940, Spokane, WA 99201-0611
509-838-511 FAX 509-838-5114
Board of Directors
Advanced Biotherapy Concepts, Inc.
6355 Topanga Canyon Blvd, Suite 510
Woodland Hills, CA 91367
Independent Auditor's Report
We have audited the accompanying balance sheets of Advanced Biotherapy
Concepts, Inc., (a Development Stage Enterprise), as of December 31,
1998 and 1997 and the related statements of operations, stockholders'
equity (deficit) and cash flows for the years then ended and for the
period from December 2, 1985 (inception) through December 31, 1998.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Advanced
Biotherapy Concepts, Inc. as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended
and for the period from December 2, 1985 (inception) to December 31,
1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2
to the financial statements, the Company has suffered recurring losses
from operations, has generated little revenue in the past years, has a
working capital deficit of $1,822,098 at December 31, 1998 and has
substantial liabilities. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
Management's plans regarding this issue are also discussed in Note 2,
and include additional capitalization of the Company, as well as an
attempt to decrease expenses. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As described in Note 4 to the financial statements, the Company
changed its policy regarding amortization of organization costs,
due to the correction of an error.
/s/ Williams & Webster
Williams & Webster, P.S.
Spokane, Washington
May 7, 1999, except as to certain line items of the Statements of
Operations, Statements of Stockholders' Equity (Deficit), Statements of
Cash Flows, and Notes 2, 4, 5 and 7 which are as of November 10, 1999.
Also, Note 2 was revised January 13, 2000
F-1
<PAGE> 29
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISES)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
Restated Restated
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,182 $ 70,027
----------- -----------
TOTAL CURRENT ASSETS 1,182 70,027
PROPERTY AND EQUIPMENT - -
OTHER ASSETS
Patents and patents pending, net of
accumulated amortization 76,527 59,228
Organization costs - -
----------- -----------
TOTAL OTHER ASSETS 76,527 59,228
----------- -----------
TOTAL ASSETS $ 77,709 $ 129,255
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 54,882 $ 45,376
Loan payable to related party 257,076 257,076
Salaries payable 1,501,360 1,333,000
Accrued interest 9,962 9,962
----------- -----------
TOTAL CURRENT LIABILITIES 1,823,280 1,645,414
LONG-TERM LIABILITIES
Note payable to related party 213,381 213,381
----------- -----------
TOTAL LIABILITIES 2,036,661 1,858,795
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001 per share;
50,000,000 shares authorized; 27,141,075 and
26,836,075 shares issued and outstanding
in 1998 and 1997, respectively 27,141 26,836
Additional paid-in capital 2,552,654 2,522,459
Deficit accumulated during
the development stage (4,538,747) (4,278,835)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (1,958,952) (1,729,540)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 77,709 $ 129,255
=========== ===========
</TABLE>
The accompany notes are an integral part of these financial statements.
F-2
<PAGE> 30
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISES)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
From
Inception
(12/02/85)
Years Ended December 31, Through
1998 1997 12/31/98
Restated Restated
<S> <C> <C> <C>
REVENUES $ - $ - $ 89,947
---------- ---------- ------------
OPERATING EXPENSES
Research and development 137,071 174,245 1,948,766
Professional fees 7,868 3,870 1,086,443
Amortization 5,850 5,850 361,675
Accrued salaries 85,000 145,000 603,516
Office and other expenses 4,437 3,382 166,530
Rent - - 109,254
Bad debt - - 95,004
Travel and entertainment 6,216 4,481 76,388
Security transfer fees 7,057 10,031 84,747
Telephone 3,134 5,395 61,869
Postage/delivery 991 3,144 41,969
Depreciation - 1,000 36,973
Management consulting - 7,775 49,740
Payroll taxes - - 27,985
Lawsuit settlement - - 27,319
Taxes, fees and licenses - 413 23,935
Shareholder relations 2,690 13,310 35,799
Stock settlement agreement - - 8,875
Patent annuities - - 7,208
---------- ---------- ------------
260,314 377,896 4,853,995
---------- ---------- ------------
Loss from operations (260,314) (377,896) (4,764,048)
Other income (expense)
Interest income 402 435 837
Interest expense - - (340,764)
---------- ---------- ------------
402 435 (339,927)
---------- ---------- ------------
Loss before extraordinary
item (259,912) (377,461) (5,103,975)
Extraordinary item,
forgiveness of debt - - 565,228
---------- ---------- ------------
NET LOSS $ (259,912) $ (377,461) $ (4,538,747)
========== ========== ============
BASIC AND DILUTED NET
LOSS PER COMMON SHARE $ (0.01) $ (0.01) $ (0.22)
========== ========== ============
WEIGHTED AVERAGE NUMBER OF
BASIC AND DILUTED COMMON
SHARES OUTSTANDING 26,988,575 25,695,575 20,351,038
========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 31
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISES)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Additional
Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1996 24,555,075 $ 24,555 $ 2,358,166 $ (3,892,154)
Correction of an error - - - (9,220)
---------- -------- ----------- ------------
Balance, December 31,
1996 restated 24,555,075 24,555 2,358,166 (3,901,374)
Common stock issued 2,281,000 2,281 164,293 -
Net loss for
the year ended
December 31, 1997 - - - (377,461)
---------- -------- ----------- ------------
Balance,
December 31, 1997 26,836,075 26,836 2,522,459 (4,278,835)
Common stock issued 305,000 305 30,195 -
Net loss for
the year ended
December 31, 1998 - - - (259,912)
---------- -------- ----------- ------------
Balance,
December 31, 1998 27,141,075 $ 27,141 $ 2,552,654 $ (4,538,747)
========== ======== =========== ============
</TABLE>
Required information regarding stock issuances prior to January 1, 1997
can be found in Note 7.
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE> 32
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
(12/02/85)
Years Ended December 31, through
1998 1997 12/31/98
Restated
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (259,912) $ (377,461) $ (4,538,747)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation - 1,000 36,973
Extraordinary gain - - (201,859)
Amortization 5,850 5,850 361,675
Expenses paid through issuance
of common stock - 7,775 226,381
Organization costs - - (9,220)
Increase (decrease) in:
Accounts payable 9,506 (3,990) 54,882
Accounts payable, related parties - (4,000) 257,076
Salaries payable 168,360 283,000 1,501,360
Accrued interest - - 9,962
---------- ---------- ------------
Net cash used in
operating activities (76,196) (87,826) (2,301,517)
Cash flows from investing activities:
Purchase of fixed assets - - (36,973)
Acquisition of patents (23,149) (5,900) (132,312)
---------- ---------- ------------
Net cash used in
investing activities (23,149) (5,900) (169,285)
Cash flows from financing activities:
Proceeds from issuance
of common stock 30,500 158,800 2,258,603
Proceeds from notes payable - - 288,508
Reduction of notes payable - - (75,127)
---------- ---------- ------------
Net cash provided by financing
activities 30,500 158,800 2,471,984
---------- ---------- ------------
Net increase (decrease) in cash (68,845) 65,074 1,182
Cash, beginning 70,027 4,953 -
---------- ---------- ------------
Cash, ending $ 1,182 $ 70,027 $ 1,182
========== ========== ============
Supplemental disclosures:
Interest paid $ - $ - $ 339,927
========== ========== ============
Income taxes paid $ - $ - $ -
========== ========== ============
NON-CASH TRANSACTIONS
The Company was involved in non
cash transactions as follows:
Professional fees and
expenses $ - $ 7,775 $ 335,910
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE> 33
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Advanced Biotherapy Concepts, Inc. (hereinafter "the Company"), was
incorporated December 2, 1985 under the laws of the State of Nevada.
The Company is involved in the research and development of the
treatment of autoimmune diseases in humans.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Advanced Biotherapy
Concepts, Inc. is presented to assist in understanding the Company's
financial statements. The financial statements and notes are
representations of the Company's management which is responsible for
their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Development Stage Activities
The Company has been in the development stage since its formation in
1985 and has not realized any significant revenues from its planned
operations. It is primarily engaged in the research and development of
the treatment of autoimmune diseases in humans.
Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred
a net loss of $269,132 for 1998. At December 31, 1998, current
liabilities exceed current assets by $1,822,098 and the Company has an
accumulated deficit during the development stage at December 31, 1998
of $4,538,747. The future of the Company is dependent upon its ability
to obtain financing, and upon future profitable operations from the
commercial success of its medical research and development of products
to combat diseases of the human immune system and products for
treatment of viral and bacterial diseases of animals. Management has
established plans designed to increase the capitalization of the
Company and is actively seeking additional capital that will provide
funds needed to increase liquidity, fund the research and development
and therefore the internal growth of the Company, in order to fully
implement its business plans. For the twelve-month period subsequent
to December 31, 1998, the Company anticipates that its minimum cash
requirements to continue as a going concern will be less than $200,000.
The anticipated source of funds will be provided from the issuance for
cash of additional common stock of the Company. In addition,
management is actively seeking a collaborative relationship with either
a pharmaceutical or biotechnology company. If successful, cash
requirements may be met through royalty or licensing fees. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts
and classification of liabilities that might be necessary in the event
the Company cannot continue in existence.
F-6
<PAGE> 34
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
Loss Per share
Basic loss per share is computed by dividing the net
loss by the weighted average number of shares outstanding during the
period. The weighted average number of shares was calculated by taking
the number of shares outstanding and weighting them by the amount of
time that they were outstanding. Diluted loss per share is computed
by dividing the net loss by the weighted average number of diluted
shares during the period. The outstanding options were not
included in the computation of loss per share because the exercise
price of the outstanding options is higher than the market price of the
stock, thereby causing the options to be antidilutive. If all options
were exercised, the total shares outstanding would be 29,176,075 and
28,871,075 for 1998 and 1997, respectively, and the weighted average
diluted shares for 1998 and 1997 would be 29,023,575 and 27,730,575,
respectively.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or
less to be cash equivalents.
Provision for Taxes
At December 31, 1998, the Company had net operating loss carryforwards
of approximately $4,500,000 which may be offset against future taxable
income. No tax benefit has been reported in the financial statements
as the Company believes there is a 50% or greater chance that the net
operating loss carryforwards will expire unused. Accordingly, the
potential tax benefits of the net operating loss carryforwards are
offset by a valuation allowance of the same amount.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates
and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
F-7
<PAGE> 35
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-lived Assets."
This standard is effective for years beginning after December 15, 1995.
In complying with this standard, the Company reviews its long-lived
assets quarterly to determine if any events or changes in circumstances
have transpired which indicate that the carrying value of its assets
may not be recoverable. The Company determines impairment by comparing
the undiscounted future cash flows estimated to be generated by its
assets to their respective carrying amounts. The Company does not
believe any adjustments are needed to the carrying value of its assets
at December 31, 1998 and 1997.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
using the straight line method over the estimated useful lives of the
assets. The following is a summary of property, equipment and
accumulated depreciation at December 31, 1998 and 1997.
Accumulated
Cost Depreciation
Lab equipment $ 27,582 $ 27,582
Office equipment 4,839 4,839
Furniture and fixtures 1,302 1,302
-------- --------
$ 33,723 $ 33,723
-------- --------
Depreciation expense for the years ended December 31, 1998 and 1997 was
$0 and $1,000, respectively.
NOTE 4 - INTANGIBLE ASSETS
Organization costs
The Company's prior policy regarding organization costs was to amortize
the costs accumulated during the development stage on the straight-line
method over sixty months starting with the first fiscal year following
the end of the development stage period. The accompanying financial
statements, for 1997, have been restated to correct an error made in
1985. The Company should have begun amortization of the organization
costs at the beginning of its planned activities. The net effect of
this correction is to increase the accumulated deficit at January 1,
1997 by $9,220 ($.0003 per share). Retained earnings at the beginning
of 1997 have been adjusted for the effects of the restatement on prior
years
Patents and patents pending
Costs relating to the development and approval of patents, other than
research and development costs which are expensed, are capitalized and
amortized using the straight-line method over seventeen years.
F-8
<PAGE> 36
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Accumulated Net
Cost amortization amount
<S> <C> <C> <C>
At December 31, 1996 $ 103,262 $ (44,084) $ 59,178
1997 activity 5,900 (5,850)
--------- --------- --------
At December 31, 1997 109,162 (49,934) 59,228
1998 activity 23,150 (5,850)
--------- --------- --------
At December 31, 1998 $ 132,302 $ (55,784) $ 76,528
========= ========= ========
</TABLE>
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company's chairman and principal shareholder has advanced funds to
pay a significant portion of the Company's expenses since 1989. The
Company owes the chairman unpaid salary of $100,000 and $150,000 for
the years ending December 31, 1998 and 1997, respectively. At December
31, 1998, the cumulative amounts owed to the chairman for expenses
amount to $257,076 and for unpaid salary amount to $1,146,000. Accrued
interest payable to related parties is $9,962 for both years.
At December 31, 1998 and 1997, the Company owed the secretary/treasurer
$13,381 for expenses paid in previous years recorded in notes payable
and $184,000 in unpaid salary recorded as salary payable.
Notes payable to related parties consist of loans payable to the
chairman and principal shareholder ($200,000) and to another officer
($13,381). The notes have no specific due date, are currently
uncollateralized, and are non-interest bearing.
During calendar 1998 and 1997, the Company received the use of
approximately 3,500 square feet of commercial building space on a rent-
free basis from a firm owned by one of the Company's directors. The
utilization of the facility in this manner is mutually beneficial to
the Company and the owner of this otherwise empty facility. No formal
agreement memorializes this month-to-month arrangement. The value of
the use of the facility is approximately $150 per month. The financial
statements have not been restated for this immaterial amount.
F-9
<PAGE> 37
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - YEAR 2000 ISSUES
Like other companies, Advanced Biotherapy Concepts, Inc. could be
adversely affected if the computer systems it, or its suppliers or
customers, uses do not properly process and calculate date-related
information and data from the period surrounding and including January
1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and devices
such as production equipment, elevators, etc. At this time, because of
the complexities involved in the issue, management cannot provide
assurances that the Year 2000 issue will not have an impact on the
Company's operations. The costs related to Year 2000 compliance are
expensed as incurred.
NOTE 7 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Information regarding the number of shares issued and consideration
received is as follows:
<TABLE>
<CAPTION>
Common stock Additional
Amount paid-in
per share Shares Amount capital
<S> <C> <C> <C> <C>
Common stock issued for cash:
1985 $ .50 100,000 $ 100 $ 49,900
1986 1.00 639,500 640 678,861
1987 1.00 850,500 850 759,650
1988 1.00 25,000 25 24,975
1993 .25 2,402,000 2,402 475,900
1995 .05 1,000,000 1,000 49,000
1996 .05 520,000 520 25,480
1997 .05 490,000 490 24,010
1997 .10 1,310,500 1,311 129,739
1997 .01 325,000 325 2,925
1998 .10 305,000 305 30,195
---------- ------- -----------
7,967,500 7,968 2,250,635
---------- ------- -----------
Common stock issued for patents assigned:
1984 .01 550,000 5,500
1985, adjustment to reflect
change in number and par
value of shares outstanding 2,750,000 (2,200) 2,200
---------- ------- ----------
3,300,000 3,300 2,200
---------- ------- ----------
Common stock issued for acquisitions:
1985 .01 13,333,500 13,334 (41,112)
---------- ------- ----------
Common stock issued for note receivable:
1986 1.00 10,000 10 9,990
---------- ------- ----------
F-10
<PAGE> 38
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)
Common stock Additional
Amount paid-in
per share Shares Amount capital
<S> <C> <C> <C> <C>
Common stock issued for services (1):
1988 $ .50 25,000 $ 25 $ 12,475
1989 .20 20,000 20 3,980
1989 1.10 5,000 5 5,495
1990 .50 3,500 4 1,746
1990 .62 14,750 14 9,131
1990 .66 10,875 11 7,166
1990 .80 8,250 8 6,592
1991 .31 7,000 7 2,163
1991 .34 100,000 100 33,900
1991 1.00 2,500 3 2,497
1991 .85 50,000 50 42,450
1992 .625 2,000 2 1,248
1992 .75 60,500 60 45,315
1993 .25 120,000 120 29,880
1996 .03 234,000 234 6,786
1996 .05 26,000 26 1,274
1996 .12 48,500 48 5,772
1997 .05 155,500 155 7,619
------------ -------- -----------
893,375 892 225,489
------------ -------- -----------
Common stock issued to
replace unrecorded certificates
1988 .001 1,200 1 (1)
1992 .001 500 1 (1)
------------ -------- -----------
1,700 2 (2)
------------ -------- -----------
Common stock issued for forgiveness of accounts payable (1)
1990 .50 25,000 25 12,475
1996 .05 150,000 150 7,350
------------ -------- -----------
175,000 175 19,825
------------ -------- -----------
Common stock issued for commissions (1)
1993 .001 1,260,000 1,260
------------ --------
Stock options issued
1993 - for debt
repayment (1) .25 200,000 200 49,800
------------ -------- -----------
1991 - for services (1) 35,825
------------ -------- -----------
Total $ 27,141,075 $ 27,141 $ 2,552,654
============ ======== ===========
</TABLE>
Per share amounts determined by information deemed most reliable based
on circumstances of each case: trading price at time of issuance or
value of services received.
F-11
<PAGE> 39
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTIONS AND ISSUANCE COMMITMENTS
On February 25, 1991, the Corporation granted non-statutory options to
purchase stock to members of the Board of Directors, officers, and
outside consultants. These remaining options offer a total of 860,000
shares at a price of $.20 per share with an exercise period of February
25, 1991 to February 25, 2001. Additional options were issued
effective February 1, 1993, for a total of 250,000 shares at a price of
$.01 per share, with an exercise period of February 1, 1993, to
February 1, 2003. During 1995, options for 50,000 shares were granted
at $.20 per share which expire in 2005. Also in 1995, options for
350,000 shares were granted at $.01 per share expiring in 2005. During
1996, options for 525,000 shares were granted at $.10 per share. The
shares purchased will be restricted and, therefore, may not be
transferred without registration under applicable Federal and State
securities laws. Stock options granted to a Director of the Company
for 325,000 shares at a price of $.01 were exercised in 1997. No stock
options were granted, exercised or cancelled in the year ending
December 31, 1998.
Grant date Expiration date Number of shares Exercise price
02/25/91 02/25/01 650,000 $ .20
11/30/95 11/30/05 350,000 .01
12/01/95 12/01/05 50,000 .20
02/01/93 02/01/03 150,000 .01
02/25/91 02/25/01 125,000 .20
02/25/91 02/25/01 85,000 .20
02/01/93 02/01/03 100,000 .01
11/20/96 12/01/05 525,000 .10
---------
2,035,000
F-12
<PAGE> 40
The condensed financial statements of the Registrant included herein
have been prepared by the Registrant from its own boos and records. In
the opinion of management, the financial statements included in this
quarterly report present fairly in all material respects, the financial
position of the Registrant as of September 30, 1999 and December 31,
1998, the results of operations fro the three and nine months ended
September 30, 1999 and 1998, and the cash flows for the three and nines
months ended September 30, 1999 and 1998, in conformance with generally
accepted accounting principles.
1
<PAGE> 41
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,076 $ 1,182
Accounts Receivable 22,000
------------ ------------
TOTAL CURRENT ASSETS 23,076 1,182
PROPERTY AND EQUIPMENT - -
OTHER ASSETS
Patents and patents pending, net of
accumulated amortization 72,028 76,527
Organization costs - -
------------ ------------
TOTAL OTHER ASSETS 72,028 76,527
------------ ------------
TOTAL ASSETS $ 95,104 $ 77,709
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 49,176 $ 54,882
Loan payable to related party 257,076 257,076
Salaries payable 1,481,305 1,501,360
Accrued interest 9,962 9,962
------------ ------------
TOTAL CURRENT LIABILITIES 1,797,519 1,823,280
LONG-TERM LIABILITIES
Note payable to related party 213,381 213,381
------------ ------------
TOTAL LIABILITIES 2,010,900 2,036,661
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001 per
share; 50,000,000 shares authorized;
28,919,075 and 27,141,075 shares issued
and outstanding at September 30, 1999
and December 31, 1998, respectively 28,919 27,141
Additional paid-in capital 2,639,546 2,552,654
Deficit accumulated during the
development stage (4,584,261) (4,538,747)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (1,915,796) (1,958,952)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 95,104 $ 77,709
============ ============
</TABLE>
The accompanying condensed notes are an integral part of these
condensed financial statements.
2
<PAGE> 42
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
<TABLE><CAPTION>
From
Inception
Three Months Ended Nine Months Ended (12/02/85)
September 30, September 30, Through
1999 1998 1999 1998 09/30/99
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 22,000 $ - $ 22,000 $ - $ 111,947
---------- ---------- ---------- ---------- -----------
OPERATING EXPENSES
Research and
development 1,588 9,455 12,407 30,607 1,961,173
Professional fees - 4,358 42,429 22,426 1,128,872
Amortization 1,500 - 4,500 - 366,175
Accrued salaries - - - - 603,516
Office and
other expenses - - 75 4,350 166,605
Rent - - - - 109,254
Bad debt - - - - 95,004
Travel and
entertainment 181 - 181 216 76,569
Security transfer
fees 1,500 1,500 5,500 5,557 90,247
Telephone 1,102 670 1,798 1,851 63,667
Postage/delivery - 87 172 697 42,141
Depreciation - - - - 36,973
Management consulting - - - - 49,740
Payroll taxes - - - - 27,985
Lawsuit settlement - - - - 27,319
Taxes, fees
and licenses - - - - 23,935
Advertising - 100 600 2,690 36,399
Stock settlement
agreement - - - - 8,875
Patent annuities - - - - 7,208
Correction of an
error-amortization - - - - 9,220
---------- ---------- ---------- ---------- -----------
5,871 16,170 67,662 68,394 4,921,657
---------- ---------- ---------- ---------- -----------
Income (Loss) from
operations 16,129 (16,170) (45,662) (68,394) (4,809,710)
Other income (expense)
Interest income 15 85 148 378 985
Interest expense - - - - (340,764)
---------- ---------- ---------- ---------- -----------
15 85 148 378 (339,779)
---------- ---------- ---------- ---------- -----------
Income (Loss)
before extraordinary
item 16,144 (16,085) (45,514) (68,016) (5,149,489)
Extraordinary item,
forgiveness of debt - - - - 565,228
---------- ---------- ---------- ---------- -----------
NET INCOME
(LOSS) $ 16,144 $ (16,085) $ (45,514) $ (68,016) $(4,584,261)
========== ========== ========== ========== ===========
BASIC AND DILUTED NET
INCOME (LOSS) PER
COMMON SHARE $ 0.001 $ (0.001) $ (0.002) $ (0.003) $ (0.219)
========== ========== ========== ========== ===========
WEIGHTED AVERAGE NUMBER
OF BASIC AND DILUTED
COMMON SHARES
OUTSTANDING 28,913,475 27,141,075 28,587,386 27,073,297 20,897,183
========== ========== ========== ========== ==========
</TABLE>
The accompanying condensed notes are an integral part of these
condensed financial statements
3
<PAGE> 43
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1996 24,555,075 $ 24,555 $ 2,358,166 $ (3,901,374)
Common stock issued 2,281,000 2,281 164,293
Net loss for the year
ended December 31,
1997 (377,461)
---------- -------- ----------- ------------
Balance,
December 31, 1997 26,836,075 26,836 2,522,459 (4,278,835)
Common stock issued 305,000 305 30,195
Net loss for the year
ended December 31,
1998 (259,912)
---------- -------- ----------- ------------
Balance,
December 31, 1998 27,141,075 27,141 2,552,654 (4,538,747)
Common stock issued 1,778,000 1,778 86,892
Net loss for the period
ended September 30,
1999 (45,514)
---------- -------- ----------- ------------
Balance,
September 30, 1999
(unaudited) 28,919,075 $ 28,919 $ 2,639,546 $ (4,584,261)
========== ======== =========== ============
</TABLE>
The accompanying condensed notes are an integral part of these
consolidated financial statements.
4
<PAGE> 44
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
From
inception
Quarter Ended Nine Months Ended (12/05/85)
September 30, through
1999 1998 1999 1998 09/30/99
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 16,144 $ (16,085) $ (45,514) $ (68,016) $ (4,584,261)
Adjustments to reconcile
net loss to cash used in
operating activities:
Depreciation - - - - 36,973
Extraordinary gain - - - - (201,859)
Amortization 1,500 - 4,500 - 366,175
Expenses paid through issuance
of common stock - - - - 226,381
Organization costs - - - - (9,220)
(Increase) in accounts
receivable (22,000) - (22,000) - (22,000)
Increase (decrease) in:
Accounts payable 1,617 916 (5,707) 916 49,175
Accounts payable,
related parties (7,300) - - 5,700 257,076
Salaries payable - (2,000) (20,055) 8,583 1,481,305
Accrued interest - - - - 9,962
--------- --------- --------- --------- ------------
Net cash used
in operating
activities (10,039) (17,169) (88,776) (52,817) (2,390,293)
--------- --------- --------- --------- ------------
Cash flows from investing
activities
Purchase of
fixed assets - - - - (36,973)
Acquisition of patents - - - (23,149) (132,312)
Net cash used in
investing activities - - - (23,149) (169,285)
Cash flows from financing
activities:
Proceeds from issuance
of common stock - - 88,670 22,726 2,347,273
Proceeds from
notes payable - - - - 288,508
Reduction of
notes payable - - - - (75,127)
--------- --------- --------- --------- ------------
Net cash provided by
financing activities - - 88,670 22,726 2,560,654
--------- --------- --------- --------- ------------
Net increase (decrease)
in cash (10,039) (17,169) (106) (53,240) 1,076
Cash, beginning 11,115 33,956 1,182 70,027 -
--------- --------- --------- --------- ------------
Cash, ending $ 1,076 $ 16,787 $ 1,076 $ 16,787 $ 1,076
========= ========= ========= ========= ============
Supplemental disclosures:
Interest paid $ - $ - $ - $ - $ 339,927
========= ========= ========= ========= ============
Income taxes paid $ - $ - $ - $ - $ -
========= ========= ========= ========= ============
NON-CASH TRANSACTIONS
The Company was involved in
non cash transactions as follows:
Professional fees and
expenses $ - $ - $ - $ - $ 335,910
</TABLE>
5
<PAGE> 45
NOTES TO CONDENSED FINANCIAL STATEMENTS
1) The condensed financial statements included herein have been
prepared by the Company, without audit, in accordance with generally
accepted accounting principles for interim financial information and
pursuant to the rules, regulations and instructions of the
Securities and Exchange Commission pertaining to Form 10-Q of
Regulation S-X. These condensed financial statements reflect all
adjustments which, in the opinion of management, are necessary to
present fairly the results of operations for the interim period
presented. All adjustments are of a normal recurring nature.
Certain information, footnotes, and disclosures normally included in
complete financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate. It is suggested that
the condensed financial statements be read in conjunction with the
financial statements and the notes thereto for the year ended
December 31, 1998.
6
<PAGE> 46
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosures
from the inception of the Company through the date of this Registration
Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
3.1 * Articles of Incorporation.
3.2 * Bylaws.
4.1 * Specimen Stock Certificate.
27.2* Financial Data Schedule
* Previously filed.
<PAGE> 47
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
ADVANCED BIOTHERAPY CONCEPTS, INC.
BY: /s/ Edmond Buccellato
Edmond Buccellato, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-SB Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Simon Skurkovich
Simon Skurkovich, M.D. Chairman of the Board February 7, 2000
of Directors
/s/ Edmond Buccellato
Edmond Buccellato President and a Member February 7, 2000
of the Board of Directors
/s/ Boris Skurkovich
Boris Skurkovich, M.D. Vice President and a February 7, 2000
Member of the Board of
Directors
/s/ Joseph Bellanti
Joseph Bellanti, M.D. Vice President and a February 7, 2000
Member of the Board of
Directors
/s/ Lawrence Loomis
Lawrence Loomis Member of the Board of February 7, 2000
Directors
/s/ Leonard Millstein
Leonard Millstein Member of the Board of February 7, 2000
Directors
/s/ Richard Eamer
Richard Eamer Member of the Board of February 7, 2000
Directors
